After years of idling, Florida Shores Bancorp Inc. is shifting into high gear with a new strategy that reflects changes in the regulatory and economic environment since the company's founding.
The Pompano Beach company started in 2005 with $55 million that it planned to invest by opening banks across the state. Florida Shores would put up 60% of the capital, and local management teams would contribute the rest. Acquisitions were not on the radar; at the time, Sunshine State banks commanded some of the highest multiples in the country.
The company has opened two banks and amassed $205 million of assets, but lately, like many organizing groups, it's found regulators slow to grant new charters. Meanwhile, acquisition prices have dropped.
So now Florida Shores aims to triple its assets in the next year through purchases — including a deal announced last week for another start-up, the $63 million-asset Shamrock Bank of Florida in Naples.
"It is very difficult in this marketplace to get the regulators to allow you to open more banks," said Steven D. Hickman, the president and chief executive of Florida Shores' Pompano Beach subsidiary and a director at the holding company. "We've been encouraged to find another way than the charter process. They are more amenable to us buying." (The Federal Deposit Insurance Corp. has said there is no official or unofficial moratorium on new bank insurance.)
And with $20 million of untapped capital and clean balance sheets at its two subsidiary banks, Florida Shores is well positioned to execute on the new strategy.
"They are in the best possible situation," said Joe Giamichael, an analyst with Rodman & Renshaw Inc. in New York. "They have the ability to be opportunistic and buy well. It is essentially vulture investing on a bank level."
Russ Hunt, the CEO of the Tampa investment bank Kendrick Pierce & Co., agreed. "It is cheaper now to buy than to start a bank," he said. "It makes sense because now they can buy at less than book value. I don't know that prices will get back to three times book value, but they have the opportunity to do multiple arbitrage." (Florida Shores did not say what it would pay for Shamrock.)
Acquirers "will have plenty of opportunities to buy healthy banks at reasonable prices," Hunt said. Though healthy banks may be reluctant to sell at a time when prices are low, those that do because of extenuating circumstances will not have many options.
"The $50 million- to $100 million-asset banks don't have a ton of exit strategies right now," he said. "They can't get the traction from larger banks. So someone like Florida Shores has the ability to be a consolidator of smaller banks."
Maintaining multiple charters can be expensive — there are sometimes multiple regulators and exams and duplicate operating expenses. But Hickman said Florida Shores' setup is not a disadvantage.
The company has a central servicing center in Clearwater that handles deposits, loans and Florida Shores' condominium lockbox program. This is a system the company developed that simplifies check processing for condo management companies and homeowners associations, and boosts Florida Shores' deposits.
"I don't think it is any more expensive, because even though we have individual bank charters and boards, and that's more expense, we centralize the backroom and capitalize on that operational perspective," Hickman said.
The Florida Shores subsidiary in Venice, which opened in 2007, had no noncurrent loans or chargeoffs in the second quarter. Similarly, Hickman's unit had no chargeoffs and a noncurrent loans-to-total-loans ratio of 0.96%, well below the average of 5.16% for Florida banks with less than $100 million of assets.
Neither unit has turned a profit yet, but industry watchers have said it is typical for a start-up bank to take two or three years to become profitable.
Colleen Kvetko, who had been trying to start a Naples bank for Florida Shores, is to help run Shamrock after the deal closes, which is expected to happen in the first quarter of next year. She is a former top banker in the region with Fifth Third Bancorp of Cincinnati. However, Florida Shores plans to keep the management team at Shamrock.
Florida Shores is also working on a deal to buy a young bank in St. Cloud. And Hickman's unit announced a deal last month for two branches of Florida Capital Bank — one in Boca Raton, the other in Fort Lauderdale. This deal is also expected to close in the first quarter; the price again was not disclosed.
Florida Shores has been hedging its bets by leaving charter applications outstanding in cities where it has purchases pending. After the deals currently in the works are done, the company plans to take a break to digest, though Hickman said that in the coming years, the company will most likely look for acquisitions in Tampa, Jacksonville and Panhandle cities.
"Unless regulators allow us to do a new charter strategy," he said. "If they do, we will revert back to that and start our own banks."